Dubbed "Game DVR," the feature is exactly what its name suggests. Players can choose to capture either the last 30 seconds of play, the last five minutes or the next five. Once a clip has been created, players can move it to the system's Upload Studio, which offers editing tools including the ability to record voiceovers for your footage and picture-in-picture functionality.
After you've completed your cinematic masterpiece, the Upload Studio can save the video or you can choose to upload it, either to only your Xbox Live friends or to the public. According to Microsoft, if you opt to save your footage, the clip will be stored as a 720p MP4 file in your cloud-based SkyDrive folder. Though not explicitly stated, the involvement of SkyDrive means that GameDVR will require an Xbox Live Gold account.
Update: Earlier this post stated that the Game DVR feature would record the last thirty seconds of gameplay or the next five minutes, when it's actually the last 30 seconds, last five minutes or next five minutes. We apologize for any confusion.